City west offices fetch $40 million

Two office buildings on Melbourne’s up-and-coming western fringe have transacted for a combined $40 million as investor demand for commercial real estate in the precinct intensifies.

A property trust run by financial services company IOOF Investment Management has snapped up a four-level corner building at 115 Batman Street in West Melbourne for $22.1 million.

An offshore Asian investor snapped up this office for $18 million.Credit:Colliers International

Slightly closer to the city centre, at 363 King Street, an offshore Asian investor has forked out $18 million to gain control of a three-storey office building.

The brick building, formerly known as NCO House, near the corner of La Trobe and King streets opposite the Flagstaff Gardens, was built in 1983 and refurbished in 1995 and 2013.

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“The purchaser was looking for a secure destination to invest in Melbourne, which they see as a safe haven for their money,” said Colliers International’s Daniel Wolman, who sold the property with Oliver Hay, Matt Stagg and David Sia.

Thomson Geer lawyer Eu Ming Lim acted for the buyer.

The deals, set at yields between 5.22 and 3.2 per cent respectively, show investor demand is running hot in the city-fringe office sector.

IOOF’s new four-level corner office sits on an island site zoned for mixed use.

The building was completely refurbished in 2009 to a 5.5 Star NABERS Energy rating and has been fully leased to engineers Norman Disney and Young and builder Probuild on net annual rent of $1,154,006.

The transaction netted the vendor, Grindana Pty Ltd, a tidy profit.

The company, controlled by accountants Stockdale & Associates, flipped the property after owning it for little more than a year.

Title documents show Grindana bought it in January 2017 for $16.05 million.

Mr Radisich said the strong result highlighted the quality of the building and the sustained appetite from investors for office assets with quality tenants.

“The city-fringe office market continues to enjoy unprecedented demand from officer users, which is largely due to the immense levels of stock withdrawal from the market for residential development,” he said.

The constriction of available development and investment opportunities in the CBD has seen investors focus on the city's western and northern fringes.

A development site at 81-89 Bouverie Street in Carlton recently sold at a land rate of $23,752 per square metre on a tight 1 per cent yield.

Another property at 611-617 King Street, a corner office building, transacted for $5.9 million on a passing yield of 2.03 per cent.

King Street has been a popular focus of smaller investors this year.

A four-level building with a ground floor retail space at 181-183 King Street, called Aries House, sold last week at auction for $5,961,000.

The building, leased to a variety of tenants on net annual income of $147,095, fetched a yield of 2.22 per cent after 38 bids from eight bidders.